Debt Consolidation
Some people refer to debt repayment plans as “debt consolidation.”
But the term more commonly is used to describe taking out a home loan to repay
debts.
For instance, you may be able to lower your monthly payments dramatically—and
lower the interest rate you are paying on your debts—by refinancing
your home or taking out a second mortgage or home equity line of credit.
As appealing as this option sounds, be careful. First, pay attention to
points or other fees associated with the home loan. They can be cost-prohibitive.
If there is any chance that you will not be able to make the payments on
the consolidation loan, remember: You’ve put your house on the line
as collateral. You don’t want to lose it.
Still, on the plus side, there can be some tax advantages associated with
paying interest on a home loan, rather than paying interest on credit card
debt.
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